Jamaica to privatize refinery — but to whom?

The Jamaica Observer points us to an IMF report (PDF) on Jamaica that says (p. 51) that the government will sell off its stake in the Petrojam refinery, a joint venture with PDVSA that has had an expansion plan on the books for since 2006.

The government stands ready to hand over its majority stake in Petrojam by selling shares to PDVSA of Venezuela to allow it to increase its stake in Petrojam from 49 percent to 51 percent. Petrojam will seek to move forward with the expansion and modernization of the refinery involving investments of US$1.3 billion over a three-year period. However, in contemplating the funding for the project, the government remains fully committed to refrain from any direct or indirect borrowing by any public sector institution, including the extension of guarantees. Over time, the government is prepared to reduce its remaining interest through the direct sale of shares to PDVSA or other potential investment partners. As PDVSA makes new equity investments in the refinery project, the Jamaican government’s equity participation will continue to be reduced accordingly

In case you were wondering, PDVSA has no money to buy out this refinery. So it will go to a private partner. With the limited refining spreads in the Caribbean and Gulf basin, it’s hard to figure who’s going to want to spend money buying and then maintaining a small refinery on an island with limited electric power, limited port facilities and a need for rents. I suspect Petrojam will end up as a fuel storage terminal under this plan.

Elsewhere in the book (p. 20) you can see that Petrojam turns a profit, and is expected to give the central government $14.1 million this year after providing $13.6 million last year. Now I can understand why the IMF genii are pushing to privatize Air Jamaica, which loses money. But the privatization — and likely death — of Petrojam seems like a good way to reduce the island nation’s productive capacity and hurt its trade balances. But what do I know. I’ve never even been to Jamaica. Comments welcome. And that means you, Structurally Maladjusted crew.